Finance Minister Arun Jaitley believes that India, aided by the series of structural reforms now being carried out, should have the potential to grow at a “reasonably high level" over the next couple of decades.
With India now having emerged as “one of the most open, globally-integrated economies” of the world, the current global economic turnaround should also prove to be highly beneficial for it, Jaitley said in an address to the US-India Strategic Partnership Forum here on Friday.
“India has the potential to grow at a reasonably high level in the next one-two decades,” he said, noting: “This is mainly because of the series of structural reforms being carried out by the Government, turnaround in the global economy, and the massive investment opportunity that the infrastructure sector offers.”
“I am certain that now that the growth is returning back to the world, the future holds an important direction as far as India is concerned. The sheer size of the country and economy would offer huge opportunity for investment in India in the next few years,” he said.
Jaitley's comments came on a day when the International Monetary Fund, after lowering its India growth forecast to 6.7 per cent from 7.2 per cent for this year, appeared to concur with his view that a rebound has already begun after the short-term adverse effects of demonetisation and the Goods and Services Tax roll-out.
“We expect India to return gradually to its medium-term growth path. And the recent high frequent data suggest the economy started to rebound already,” IMF's Director for Asia and Pacific Changyong Rhee told a news conference. As for its earlier action of pegging growth at 6.7 per cent, Rhee sought to emphasise that this rate was “still (a) very high growth rate compared to most other countries”.
The Finance Minister, in his comments, noted that with the help of the slew of reform measures, India was steadily moving up on the Ease of Doing Business ranking and transforming itself into an investor-friendly destination. He highlighted the major expansion undertaken in the use of digital technologies for governance. Jaitley once again strongly defended the Modi Government's big push with the twin initiatives of demonetisation of high-value currency to attack the shadow economy and the launch of Goods and Services Tax as the biggest-ever reform of the country’s complex system of indirect taxes.
After coming to power in 2014, the BJP-led NDA Government could have looked the other way and allowed the shadow economy to continue, but it was determined to deal with this challenge, he said and referred to a series of steps that culminated with the demonetisation last November.
The Government, Jaitley said, was well aware of the possibility of a short-term adverse impact following demonetisation, while benefiting the country greatly in the long-run. The same could be said of the growth disruptions over a quarter or two following the launch of the GST. But then, nothing can detract from the fact that it is a far more efficient system that has brought the country together economically and allowed for free flow of goods and services, he noted.
The International Monetary Fund, meanwhile, has expressed the view that the favourable outlook for Asia, including India, provides an important opportunity to push forward with difficult reforms.
IMF Deputy Director Kenneth Kang, responding to a question at the news conference on Asia-Pacific, spoke of three broad policy initiatives on this score.
The IMF's first prescription is to address the corporate and banking sector weaknesses, by accelerating the resolution of nonperforming loans, rebuilding the capital buffers for the public-sector banks, and enhancing banks' debt recovery mechanisms.
“A second would be to continue with the fiscal consolidation through revenue measures, as well as further reductions in subsidies. And lastly, it is to maintain the strong momentum for structural reforms in addressing the infrastructure gaps, improving the efficiency of labor and product markets as well as further agricultural reforms,” Kang said.
Replying to a question on labour market reforms, Kang said there is a need to reduce the number of labour laws which currently number around 250 across the central and the state levels. A second area would be to boost the employment opportunities for women in India.